Kelly laments Westpac's poor IT performance

At Westpac's annual earnings announcement today, CEO Gail Kelly picked the bank's technology operation as its most notable "low light" in a year that saw hundreds of IT staff, including the bank's tech titans, purged and replaced with new blood.

Westpac CEO Gail Kelly

(Credit: Westpac)

"Starting with the low lights or areas of concern ... firstly, with regard to technology, our delivery platforms and our associated processes are not all they need to be and they have let us down form time to time," Kelly said today.

"And so it's clear they need work to enhance reliability and to equip us to support our customers in the way we'd like. And we have certainly identified this issue, we are strengthening our team and I believe we have it in hand," she said.

The bank's information technology team was hit hard in the second half of 2008. Westpac commenced a massive shake up of its technology leadership team in May, which saw several heads of technology ousted, while Kelly brought in ex-CBA CIO Bob McKinnon. Meanwhile Westpac had increased overall staff by 294 since 30 September 2007, an equal number from its technology division had been made redundant, leaving staffing levels overall flat.

Cuts to Westpac support functions affected 351 staff over the year, 261 of which were cut from IT and operations, mostly in the second half of the year.

The bank's overall operating expenses of $4.87 billion had increased 7 per cent or $333 million over the year, being impacted by higher technology costs through higher licensing and maintenance fees, however, overall it now had an expense to income ratio of 43.9 per cent which was an improvement, Westpac reported.

Affecting its equipment expenses, Westpac wrote down $7 million on software following the completion projects affecting its Super for Life business and another to build capabilities to support online credit card applications.

Compliance costs more than doubled over the year to 30 September, increasing by $31 million to $69 million. Westpac spent $36 million on anti-money laundering/counter terrorism financing compliance and $18 million on operational risk improvements.

The bank had spent around $31 million upgrading various banking platform software and infrastructure in the second half of the year, contributing to its capitalised software balance of $464 million for the year.

The balance was down $63 million on last year, and would have been less were it not for $94 million investments in its banking systems. That included $15 million on replacing its foreign exchange system; $19 million on improving security and developing its chip and pin credit card systems; $31 million on its core banking platform work; and $33 million in developing its compliance systems. Westpac said it had conducted a detailed review of capitalised software costs in the second half of 2008.

The bank also highlighted the $700 million it has slated for the integration of St George, much of which is expected to go towards technology, but also includes transaction expenses and general restructuring.

Kelly said planning for the integration was well underway.